Sears to close 100 to 120 Kmart and Sears stores

This May 4, 2011 file photo shows the entrance to the Sears Holdings Corp. Prairie Stone campus area in Hoffman Estates, Ill.

NEW YORK » Sears Holdings Corp. plans to close between 100 and 120 Sears and Kmart stores to raise cash after a weak holiday shopping season for the retailer.

The closings fueled speculation about whether the 125-year-old retailer can turn itself around.

The closings are the latest and most visible in a long series of moves to try to fix a company that has struggled with falling sales and shabby stores as rivals like Wal-Mart Stores Inc. and Target Corp. spruced up their looks and turned into one-stop shopping sources.

Billionaire investor Edward Lampert purchased Kmart out of bankruptcy in 2003 and bought Sears, Roebuck & Co. a year later. Since 2004 Sears Holdings — which operates both Kmart and Sears stores — has watched its cash and short-term investments go from about $2.09 billion for the year ended Jan. 31, 2004 to $1.34 billion for the year ended Jan. 31, 2011, according to FactSet. The figure now stands at about $700 million.

Balter added that Sears' weakening performance may lead its vendors to start to worry about their exposure. If vendors stop shipping to a retailer or start insisting on cash up front, it can spell the end.

That company disputes talk that it is in trouble financially or will have problems surviving. Spokesman Chris Brathwaite says Sears Holdings has more than $3.5 billion of liquidity, consisting of $700 million in cash and $2.9 billion available under its credit lines.

Still, Sears Holdings said its declining sales, ongoing pressure on profit margins and rising expenses pulled its adjusted earnings lower. The company predicts fourth-quarter adjusted earnings will be less than half the $933 million it reported for the same quarter last year.

The retailer also anticipates a non-cash charge of $1.6 billion to $1.8 billion in the quarter to write off the value of carried-over tax deductions it now doesn't expect to be profitable enough to use.

Some industry experts say part of the problem Sears is facing is that economic difficulties continue to grip its core customers. These middle-income shoppers have seen their wages fail to keep up with higher costs for household basics like food.

But the bigger issue, analysts say, is that Sears hasn't invested in remodeling, leaving its stores uninviting.

Preschool teacher Sara Kriz concurred. Picking up conditioner at a Kmart in Manhattan on Tuesday, Kriz said she shops at Kmart "only when I have to," which amounts to once every few months. Yet she goes to Wal-Mart or Target nearly every week because, she said, they are cleaner and better stocked.

"It seems easier to go to Target and Wal-Mart to get the same thing at the same price," she said.

Sears Holdings announced Tuesday that revenue at stores open at least a year fell 5.2 percent for the quarter-to-date at both Sears and Kmart. That includes the critical holiday shopping period. Its Kmart stores reported a 4.4 percent decline, with layaway faltering as rivals like Wal-Mart and Toys R Us found success with their own layaway programs, which allow financially stressed shoppers to finance their holiday purchases by paying a little at a time.

Both Kmart and Sears stores reported weak consumer electronics sales. Sears, whose same-store revenue dropped 6 percent, also reported softer sales of home appliances. The same-store revenue metric is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.

Sears Holdings appeared to stumble early in the holiday season, as it opened its Sears, Roebuck and Co. stores at 4 a.m. on Black Friday, the day after Thanksgiving. Rivals including Best Buy Co., Wal-Mart and Toys R Us opened as early as Thanksgiving night. Sears stores had opened on Thanksgiving Day in 2010. Kmart has been opening on Thanksgiving for years.

A hint that trouble might be brewing came in mid-December when Sears Holdings unexpectedly announced that 260 of its Sears, Roebuck and Co. locations would stay open until midnight through Dec. 23.

In an internal memo Tuesday to employees, CEO and President Lou D'Ambrosio said that the retailer had not "generated the results we were seeking during the holiday."

"The extent of the (sales) weakness may be larger than expected but the reasons behind it are not. It begins and some would argue ends with Sears' reluctance to invest in stores and service," Balter said.

Sears has yet to determine which stores will close but said it will post on http://www.searsmedia.com when a final list is compiled. The company would not discuss how many, if any, jobs would be cut.

The company said that the store closings will generate $140 to $170 million in cash from inventory sales. It expects the sale or sublease of real estate holdings to add more cash.

The Hoffman Estates, Ill., company has more than 4,000 stores in the U.S. and Canada.

Its stock dropped $10.66, or 23.3 percent, to $35.19 in midday trading. The shares dipped to their lowest point in more than three years at $35.13 earlier in the session.

Aside from the planned store closings, Sears is altering the way it handles stores that are not performing as well as others. The company says it will no longer prop up marginally performing stores in hopes of improving their performance and will now concentrate on cash-generating stores.

Sears Holdings said it also plans to lower its fixed costs by $100 million to $200 million and trim its 2012 peak domestic inventory by $300 million from 2011's $10.2 billion at the third quarter's end.

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inversewrote:

Seems the Sears stores in Ala Moana and Pearl Ridge do well but they might close many of
the Kmarts in Hawaii. The extra cost of doing business in Hawaii will shut these Hawaii stores down for good unless they are in a outstanding location like Ala Mo Ctr. With higher City and States taxes and fees, increased cost for food, water, health care, sewage, electricity, private school tuition rates, rent, etc. AND increased deficit spending and bond sales by the City and state to pay for the rail project and other public works projects, which will result in the need to raises taxes and fees even higher, Hawaii will follow California and Greece and go bankrupt and destroy out economy. The only thing staving off this economic failure is Hawaii is almost set between mainland US and N Korea and China and the US military realizes the longterm safety if the US is to feed tons of money to maintain Hawaii as a strong military outpost for mainland US; ie submarine base, anti-missle missile defense, etc, Even when Inouye is gone, this still should not change.

on December 27,2011 | 05:23AM

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TMJwrote:

I used to love Sears for big ticket items and appliances. Unfortunately, I have been burned more than a couple of times as the quality of merchandise has slipped off. Now I use Sears for socks & underwear.

on December 27,2011 | 06:14AM

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frontmanwrote:

Hope and Change...........don't you love it.

on December 27,2011 | 06:27AM

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MrMacadangdangwrote:

So when it rains or you trip over yourself I'm guessin you still find a way to blame the president huh? So who do I blame for your lame comment? Oh that's right Hope and Change, whooooha.

on December 27,2011 | 03:12PM

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Vivgiewrote:

Pay over a thou for a front loader washer? Mo beddah go Laundryland or 19th Avenue laundromat and put in a few quarters. $5 for a commerical front loader. No maintenance or repairs. Laundryland has a service where they will wash and fold your clothes and charge by the pound. Makes life much easier. In Rio nobody owns a washer drier. Apartamentos are too small. So they go to a little laundry business in the neighborhood. The returned my stuff in a nice little brown paper tied with string. I've never seen such clean clothes. Towels so white I thought they were replaced with new ones or got drycleaned. No wrinkles either.

on December 27,2011 | 06:50AM

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4watitsworthwrote:

I don't think our stores here look run down or uninviting. As long as it doesn't look really run down like some stores I've seen on the mainland, the look is fine with me. The pricing is more important to me and Sears has good sales. They carry clothing not available at other stores at a reasonable price. As for appliances, I haven't purchased anything recently. I purchase the extended warranty and have it serviced every year so my washer lasts longer than the expected life expectancy. With the warranty, I'm told that if they cannot fix the washer, they will replace it with a comparable one at no charge. I think that's a pretty good deal since they'll also check any problem you have at no additional charge.

on December 27,2011 | 07:07AM

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Manapua_Manwrote:

Sears once had the best toy selection in the 70's. I remember looking forward to the Sears catalog in the mail.

on December 27,2011 | 07:29AM

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kameleokalani44wrote:

The Sears at Windward Mall is a joke. I haven't even found underwear there that fit my Queen size butt. The only good thing is their Aloha wear. But almost everytime I go in there with something in mind, I always walk out without it. I end up in Pearl Ridge. The Stadium K-Mart makes me upset everytime I go in there. 18 cash register stands and only 4 open. No matter what I buy I end up standing in line even at 9-10am.

on December 27,2011 | 08:11AM

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Oakiewrote:

As a once proud execuitive(now retired) of Sears Hawaii, it makes me sad what is happening to a once proud company. I worked with a dedicated bunch of people who i'm are as disturbed as I am.

on December 27,2011 | 08:15AM

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EyeKeawrote:

Wow, scary, an executive that cannot write a simple sentence correctly, no wonder Sears is in trouble.

on December 27,2011 | 09:18AM

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EyeKeawrote:

With Kmart certainly to close stores here, I hope JC Penny comes back, I miss them and I don't like Target...too expensive and I don't care too much for their clothing lines.

on December 27,2011 | 09:20AM

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hilopangowrote:

At least Sears & Kmart have clothing that fit the average sized female, and not stuff just for junior Barbie dolls like Target. I normally go to the Salt Lake Kmart; the Iwilei store has an oppressiveness that does not sit well with me. Sears Ala Moana has been my go-to place for almost everything for decades, they can deliver a refrigerator same-day if you are in desperate need of one. I made the mistake of going to Best Buy for a fridge, had to wait over a month for it to come in from the mainland warehouse and two more weeks to take delivery!

on December 27,2011 | 12:18PM

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kennysmithwrote:

i want everyone there to know this, when i come to the honolulu i do shop in the store there, i also like it there when i come there.